Mixed Messages in China’s Online Video Sector

Regulators move against U.S. shows, but as Alibaba is proving, investment is likely to continue

china film

HONG KONG – Beijing media regulators last week sent out notices to China’s online video platforms to remove a quartet of U.S.-made TV shows. In recent days it has also stripped Sina.com of a couple of video broadcast licenses.

The moves may appear to suggest a central-government crackdown against Western content on China’s only partially open Internet. That would be a damaging blow for the online video services, which have quit their pirate roots, and flourished by showing content which is not subject to all of the restrictions of theatrically released movies.

But it is not clear that the moves by State Administration of Press Publication Radio Film & Television represent a new cold front. And new initiatives in China’s online space are being pushed ahead.

These include Alibaba’s $1.2 billion investment in Youku Tudou; a likely shortening of release windows at Hollywood VIP, a video streaming service run by Tencent, the world’s fourth largest internet company; and the commercial launch this week (April 28) of You On Demand’s subscription service using Xiaomi’s over the top set top box.

SAPPRFT issued take-down notices for “The Big Bang Theory,” “The Good Wife,” “NCIS” and “The Practise” requiring their immediate removal from sites.

But the politically-sensitive “House of Cards,” season 2 remains online in China, and the SAPPRFT move may have more to do with punishing Sina.com than a redrawing of the lines of censorship.

Sina had two licenses revoked for screening “lewd and pornographic content.” The company has made multiple public apologies since.

The problem of understanding SAPPRFT’s may be deliberate. The authority offered no explanation of why the four shows should be removed. But by saying nothing it is encouraging the video networks to err on the side of caution and to effectively self-censor.

The booming online video scene remains in something of a regulatory limbo since 2009, which means more films and shows with a greater variety of genres can be shown online than get into China’s cinemas. Theatrical films are subject to import quotas. And locally made Chinese films are subject to script approval before production, as well as final censorship before a release is approved.

But nor is the online sector is not a free-for-all as it is sometime portrayed.

Regulators have regularly acted against some sexy content and has urged the platforms to do more to monitor user-generated-content. It seems most likely that Sina has tripped up in this area.

“Last year [SAPPRFT] made appoint by removing ‘Django Unchained’ from the cinemas, before allowing it back on release. This year, by hitting these shows, seemingly at random, they are flexing their muscles and keeping everyone on their toes,” one platform operator told Variety. “We welcome oversight of the industry and think that keeping it free of the worst UGC will help us all to grow.”

The online video sector is certainly what is currently attracting the big money in China. With access into hundreds of millions of digitally-connected cable homes and hundreds of millions more mobile devices, online has far wider reach than even the fast-expanding multiplex sector. For Hollywood the online sites are potentially larger buyers of their shows. While for local creators, the platforms’ new production initiatives offer far wider audience reach.

The business models of the Chinese online video sites are still evolving – most are still dependent on advertising support – but transactional models are emerging. These are being helped by the ability to make micro-payments through mobile devices.

They will also likely be accelerated by Alibaba, which already includes Amazon-like services and whose portfolio of assets also includes Alipay, China’s equivalent of PayPal.